Economics PPC & Growth Quiz

1. 100 100 100 100 100 200 200 200 200 200 300 300 300 300 300 400 400 400 400 400 500 500 500 500 500 Exit

2. PPC & Eco. Growth for 100 If a certain combination of goods and services lies outside the PPC of an economy, what must be true? Resources are not available to achieve that combination of goods and services Push the Space Bar to check your answer.

3. PPC & Eco. Growth for 200 An increase in which of the following will most likely promote economic growth? Consumption, investment tax credits, real interest rates, the trade deficit? Investment Tax Credits. This would result in new technology being employed and the PPC shifting to the right. Push the Space Bar to check your answer. Push the Space Bar to check your answer.

4. PPC & Eco. Growth for 300 The concept of opportunity cost would no longer be relevant if ___________________. The supply of all resources was unlimited. Push the Space Bar to check your answer.

5. PPC & Eco. Growth for 400 What would happen to the PPC, LRAS, and Long-Run Phillips Curve if economic growth had occured? The PPC and LRAS would shift to the right and the LRPC would shift to the left. Push the Space Bar to check your answer.

6. PPC & Eco. Growth for 500 What factors will shift the PPC and LRAS to the right and Long-Run Phillips Curve to the left? Using new and improved technology, more economic resources, or international trade to acquire those resources or technology. Push the Space Bar to check your answer.

7. Inflation/Unemployment for 100 What groups would be hurt most by unanticipated inflation? Savers, lenders with fixed rate loans, and people on fixed incomes (and with inadequate COLAS) Push the Space Bar to check your answer.

8. Inflation/Unemployment for 200 What does a person have to be doing in order to officially count as being unemployed? They have to be currently looking for employment. Push the Space Bar to check your answer.

9. Inflation/Unemployment for 300 • What type of unemployment is characterized by losing your job due to a recession? • What type of unemployment is characterized by leaving a job to pursue other employment? • What type of unemployment is the result of a lack of skills in demand by employers? • Cyclical • Frictional • Structural Push the Space Bar to check your answer.

10. Inflation/Unemployment for 400 If the population is 180, the number of employed is 94, the unemployed is 6, and those not in the labor force total 80, what is the unemployment rate? 6.0% (6/94 + 6 x 100) Push the Space Bar to check your answer.

11. Inflation/Unemployment for 500 • When an economy is at full-employment and there is a decrease in the real rate of interest, what type of inflation would occur? • If a negative supply shock, such as an increase in energy prices occurred, what type of inflation would occur? • What is the common name for the inflation in part 2 above? • Demand-Pull Inflation (AD curve shifts right) • Cost-Push Inflation (SRAS shifts left) • Stagflation. Push the Space Bar to check your answer.

12. GDP/Rational Expectations for 100 True or False: If a foreign company builds a plant in the U.S., that investment adds to GDP? True Push the Space Bar to check your answer.

13. GDP/Rational Expectations for 200 If in one year, spending on C, I, and G totaled 103% of GDP, what must be true? Net Exports (Xn) must be negative. Push the Space Bar to check your answer.

14. GDP/Rational Expectations for 300 If nominal GDP were $1,200 and the GDP Deflator or Price Index were 115, what would real GDP be? 1043.48 (nominal GDP x 100/Price Index) Push the Space Bar to check your answer.

15. GDP/Rational Expectations for 400 Under the Rational Expectations Theory, an announced expansion of the money supply will change nominal and real GDP in which ways? Nominal GDP goes up as M goes up. However, it is believed by Rational Expectations Theorists, that real output or real GDP will be unaffected as investors will take positions in the market to offset actions by the Fed. Push the Space Bar to check your answer.

16. GDP/Rational Expectations for 500 • Does the construction of a new home count in GDP? • If so, where? • Yes • In I. Push the Space Bar to check your answer.

17. SR v. LR and Phillips Curve for 100 If an economy is facing the condition shown below, what is true about the long-run equilibrium of the economy depicted? LRAS PL AS AD GDPr As wages and other input costs increase, the per-unit cost of production would go up and the SRAS will shift to the left to restore long-run equilibrium. Push the Space Bar to check your answer.

18. SR v. LR and Phillips Curve for 200 An economy is in a short-run equilibrium at a level of output that is less than full-employment output. If there were no fiscal or monetary policy interventions, which of the following changes in output and the price level would occur in the long-run? The AS curve would shift to the right to restore long-run equilibrium as wages and other input costs decline due to the recession and as such, the per-unit cost of production would go down and output would increase and the PL would decrease. Push the Space Bar to check your answer.

19. SR v. LR and Phillips Curve for 300 An increase in AD would have what affect on the Short-Run Phillips Curve? Movement up the Short-Run Phillips Curve. (to the left) Push the Space Bar to check your answer.

20. SR v. LR and Phillips Curve for 400 The Short-Run Phillips Curve shows what kind of relationship? An inverse relationship between inflation and unemployment. Push the Space Bar to check your answer.

21. SR v. LR and Phillips Curve for 500 • What is the shape of the LRPC? • Why is it shaped that way? • If the natural rate of unemployment decreases, which way will the LRPC shift? • If the natural rate of unemployment increases, which way will the LRPC shift? • vertical. • Because studies have shown that in the LR (over decades), there is no relationship between the unemployment rate and inflation rate. • Left. • Right. Push the Space Bar to check your answer.

22. Nominal/Policy Mix for 100 If the economy is at full-employment and policmakers want to maintain the price level, but encourage greater investment, which combination of monetary and fiscal policy actions would best achieve that goal? Monetary PolicyFiscal Policy a) No Change Contractionary b) Expansionary No Change c) Expansionary Contractionary d) Expansionary Expansionary e) Contractionary Expansionary C. The expansionary monetary policy will increase the money supply, decrease interest rates, and that would increase borrowing for investment spending by businesses. The contractionary fiscal policy would reduce the demand for loanable funds by the government, decrease interest rates, and encourage borrowing. The expansionary monetary policy would increase AD and PL, while the contractionary fiscal policy would offset by decreasing AD and the PL. Push the Space Bar to check your answer.

23. Nominal/Policy Mix for 200 If the average PL goes up by 10% in a year, what must also goe up by 10% for real output to remain the same? Nominal National Income. Nominal Income or wages must go up in order the purchase the output at increased prices. Push the Space Bar to check your answer.

24. Nominal/Policy Mix for 300 If the nominal interest rate is 12% and the expected inflation rate is 5%, then the real interest rate must be? 7%. The real interest rate (r%) = nominal interest rate (i%) minus inflation % Push the Space Bar to check your answer.

25. Nominal/Policy Mix for 400 Suppose that the government decreases taxes and at the same time the central bank decreases the discount rate. How will these combined actions affect real GDP and interest rates? GDPr will increase as the decrease in taxes (fiscal policy) and decrease in the discount rate (monetary policy) will both increase AD. However, the change in interest rates is indeterminate. This is because the decrease in the discount rate will increase the money supply, increase the supply of loanable funds, and decrease the real interest rate, while the decrease in taxes will move the nation toward a budget deficit and cause an increase in the demand for loanable funds, thus increasing real interest rates. Push the Space Bar to check your answer.

26. Nominal/Policy Mix for 500 Increasing government spending and decreasing the federal funds rate would be effective in fighting recession or inflation? recession. Push the Space Bar to check your answer.